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Trader thoughts - The long and short of it

The various US equity indices have traded in different directions and traders switch focus as the markets have a feast of information to focus on.

Market Data
Source: Bloomberg

There is the US reporting season underway with mixed results currently being posted. Currently, early reporting in financials and industrials is maintaining the view that the broader US will maintain a better than 9% earnings per share growth required to support current market valuations.

Overnight the Dow saw selling as the IBM’s results fell short of expectations, this stock, heavily weighted in the Dow saw the index move to a new two-month low. This type of price movement would have the market bulls very concerned, as this market moves to a 100-day moving average, which is considered to be a key indicator of market sentiment and strength.

The impending UK elections announced on short notice yesterday, to geo-political tensions in North Korea and this weekend’s French elections could give the bears of the market the momentum to sell into the fading Trump rally. However, we saw US dollar strength with the US dollar basket moving 0.5% higher through the session. This US dollar strength saw most G10 currencies weaker, with the local Aussie trading back under the 75 cent handle. This is something that may inspire the bulks commodity bulls today, as iron ore also moved higher after finding support at the medium-term trend line and closing at $64.60 a ton, the bullish support was taken across the coking coal bulk also trading 0.7% higher and off the recent lows.

This may be the space for the commodity bulls to re-emerge following the recent and significant correction in the iron ore space.

Among all of this, oil overnight moved lower to trade at $50.49 a barrel, which was below both the 50- and 100- day price averages and just above the key support level of $50. Traders have ignored the fall in crude inventories and instead focused on the overnight rise in gasoline inventory data (which increased 1.54 million barrels). Interestingly, a logical move before the coming US ‘driving season’ and the maintenance period for refineries in now complete.

This weaker sentiment will follow through into our markets today, with the BHP American depository receipt (ADR) closing down at 1.2%.
 
In the financial sector the CBA ADR is indicating a flat open for the stock and will bring in a flat open for the overall market.

With overnight Gold trading $10 lower to finish at US$1279.83, this will see further pressure on the gold producer Newcrest in today’s session. 

Overnight SPI futures are down 13 points, this will have the daily cash market continuing to trade under the key support level of 5833. Further weakness in the heavily weighted financials may keep the buyers on the sidelines with a possible test of the key 5700 support level in the coming weeks.

Often these types of markets offer opportunity to the trader investor as oversold stocks find a bid.

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